What is the difference between a fixed mortgage rate and Variable mortgage rate

In general there are two major types of loans viz., fixed mortgage rate and the variable mortgage rate. Though both types of loans have gained popularity however both of these have their own merits and demerits, which you need to examine carefully before proceeding for a loan.

In a fixed mortgage rate you can the same amount of monthly payments throughout. In the main advantage of this type of loan is that the interest rates do not change even if there is an increase in the industry. The rate of interest that was set at the very beginning remains the same until the entire loan has been paid off.

On the contrary, in a variable mortgage rate some adjustments in the interest rates can be made with changes in the market rate. Monthly payments will increase as if the rates are higher for the present time. This rate is regulated by a certain interest index.

You are in an advantageous position if the rate of interest decreases at a certain period of time. But you are always at a risk in variable mortgage rate if the interest rate sores to a high.

Even if you have financial stability, fixed rate mortgages are most suitable and if you are venturous and are willing to gamble a bit then you can go for the variable mortgage rate.

[tags]fixed rate mortgages,variable rate mortgages[/tags]